<< I'm a student w/ about $9,000 in a deductible IRA. My cost basis was $6,000. I've also made around $20K this year. >>

Congrats!!!

<< When I roll over into the Roth IRA, all gains are taxed as regular income, correct? >>

If you have basis in your IRA, then only about $3k will be subject to tax. This implies that the IRA was a NON-DEDUCTIBLE IRA. If you IRA was deductible for all of the contributions that you made in the past, then you really have NO basis in your IRA, and the entier $9k would be subject to tax at ordinary rates...spread out over 4 years.

<< Thus, for the 1998 tax year I'll have extra "income" of $9,000, is this correct? >>

Maybe yes, maybe no. It depends if you really DO have a basis in your IRA, as noted in the response above. But obviously, in the worst case, you would be staring down the barrel of tax liability on $9k.

<<Well, 15 or 28% now is a lot better than 30-40% in forty years. >>

Can't argue with you on that point.

<< It's a good thing I'm not graduating until Dec. 1998. Otherwise I'd already be in a much higher tax bracket.>>

Again, remember that you'll have to spread the recognition of the distirbution out over 4 years, regardless of if you want to or know. So if you rollover in 1998, you'll recognize $2,250 in additional income, and $2,250 for 1999, 2000, and 2001 (assuming that the $9k is all taxable). So things might not work out as rosey as you might think.

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